Bhavesh Garg Advises Not Chasing Trends And Adopting A Long-Term Approach For Proper Asset Allocation

Bhavesh Garg

It is not uncommon for investors to be swayed by the latest market frenzy, putting their hard-earned money at risk. However, the prudent path to financial success lies in adopting a long-term approach to asset allocation, guided by historical data and a strategic perspective.

The Pitfall of Chasing Trends

Bhavesh Garg, the director of VSN Financial Services, cautions against the temptation of chasing investment trends. He emphasizes, "In the world of finance, trends are like fleeting mirages. They may seem promising in the short term, but they often lead to disappointment in the long run." Mr. Garg's portfolio, which consists of a diversified mix of stocks, bonds, and real estate, highlights his commitment to a long-term approach.

Chasing trends is a risky endeavour because it often involves following the crowd without conducting proper research. This can lead to hasty investment decisions based on the fear of missing out (FOMO). Investments made without a strong foundation of data and analysis are akin to building a house on shaky ground; they are bound to collapse sooner or later.

The Perils of Recency Bias

One of the psychological factors that drive investors to chase trends is recency bias. This cognitive bias causes individuals to give more weight to recent events and information while discounting historical data. For instance, if a particular asset class has performed exceptionally well in recent months, investors may rush to invest in it, assuming it will continue to yield high returns.

However, history has shown that markets are cyclical, and what goes up must eventually comes down. Ignoring this fundamental truth can lead to significant losses. To mitigate recency bias, Garg suggests looking at long-term historical data and analysing trends over multiple market cycles. This approach allows investors to make informed decisions rather than succumbing to the allure of short-term gains.

Multi-Asset Allocation: A Strategic Approach

To build a robust and resilient investment portfolio, it is essential to adopt a multi-asset allocation strategy. Multi-asset allocation enables investors to weather market volatility with greater ease. When one asset class underperforms, others may compensate, minimizing the overall impact on the portfolio. This strategic approach ensures that investments are not overly dependent on the performance of a single trend or asset class.

The Power of Compounding in Mutual Funds

One of the most compelling reasons to adopt a long-term approach to asset allocation is the power of compounding. By reinvesting dividends and interest earned on investments, compounding allows your money to grow exponentially. The longer the investment horizon, the more pronounced the effects of compounding become. This is why it is crucial to resist the temptation to constantly shuffle your investments in pursuit of short-term gains. Instead, stay the course and let the power of compounding work its magic.

In the words of Bhavesh Garg, "In the marathon of wealth creation, consistency and patience win the race. Don't be swayed by short-term trends; focus on the long-term horizon, and you will reap the rewards of financial success."